Date: 09/22/2000 12:14 PM
Subject: S7-13-00
We are a local firm in Washington that performs audits as well as other
accounting services, tax compliance and various business consulting services.
We pride ourselves on being able to provide our clients with the broad range of
services that they need to run their businesses efficiently and profitably.
Additionally, we are a member of BKR International, an organization of
independent member firms worldwide.
Even though we no longer do audit work for publicly held companies we strongly
believe that this scope of services rule must not be allowed to go forward.
There are too many problems that would develop.
The most dangerous impact for the accounting profession is the likely prospect
that the proposed rule would set a precedent for other regulators. Even
accounting firms like us that do not audit SEC registrants could be impacted by
these new rules. The proposed SEC rule would be viewed as the new model by
state boards of accountancy, as well as federal (e.g., banking and ERISA) and
other regulators. These new proposed SEC rules could influence the regulatory
approach to auditor independence outside the United States as well. This could,
then, have an adverse effect on the firms in our organization and reduce our
ability to provide accounting and consulting services and to compete in the
global economy.
The SEC claims its proposed rule "would not affect tax-related services" to
audit clients. However, it would ban acting as an advocate for an audit client,
or providing expert services in administrative proceedings, thus (except in
preparing returns) potentially prohibiting CPAs from representing audit clients
before the IRS.
Regional alliances or cooperative agreements between accounting firms could
result in each firm being required to be independent of each other firm's attest
clients. Moreover, the restrictions would extend to any alliance or cooperative
agreement with overseas accounting and other firms (such as legal service
providers).
If the rule is adopted, there will be a negative effect on recruiting and
retention of the best talent. The best audit professionals will not want to be
at a firm where 25% - 40% of the market is "off-limits," and the same is true
for the best non-audit professionals. Similarly, the best and brightest
students will not be drawn to firms with a limit on upward opportunities. The
"audit-only" firms endorsed by the proposal will have difficulty attracting the
necessary talent both from accounting programs and from information technology
programs, because the best talent will be drawn toward industries with broader
career opportunities.
The SEC has needlessly tied its popular and long-overdue modernization of family
disqualification rules-depression-era rules that discriminate against working
women and two-career families-to its far more controversial scope of services
initiative. Modernization of the financial-interest standards can and should
occur on an expedited basis, independent of the scope of services initiative.
The scope of services initiative requires more time for fact finding and
analysis than provided by the SEC's time frame.
This unwarranted and intrusive proposed regulation must be carved out of the
SEC's Proposed Rule Governing Auditor Independence.
Christine A. Bogard, CPA
Abramson Pendergast & Company PS